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First, if you would like to receive USEFUL information about your vehicle, (ESPECIALLY when you are asking about engine controls) it would be nice if you would mention WHICH ENGINE your vehicle is equipped with!
1995 Mercury Cougar XR7 was equipped with 3 different engines: 3.8L NON-SC VIN CODE  3.8L SC VIN CODE [R] 4.6L V-8 VIN CODE [W]
The crank sensor for both of the 3.8L engines is located at the lower right FRONT of the engine.
The crank sensor for the 4.6L engine is located at the lower right REAR of the engine.
I just got done replacing the O2 sensors in my 99 Cougar due to throwing a P0135 malfunction code. There's 3. Facing the engine there's one in the front coming off of the front header, which is easy to get to. Another more tricky one if between the engine and the fire wall on the rear header pipe. The third is under the vehicle behind the transmission pan on top of the exhaust. In order to replace the O2 sensor near the fire wall you will need to remove the 4 retaining bolts for the ECM module and move it out of the way. Additionally you will need to remove the 2 retaining nuts for a wiring harness that is seated below the ECM module. Pay close attention to the connectors because the front and under vehicle O2 sensors have round connectors the one near the firewall has a squared connector. I was able to replace all 3 by myself in approximately 35 minutes. If your throwing a O2 heater malfunction code it is most likely going to be the sensor near the firewall. make sure that you know someone with a code reader so the code can be cleared. If you're do for an emmissions inspection be sure to put at least 40 miles on the new O2 sensor with different types of driving (e.g. highway, coasting, decellerated turns and rapid acceleration). Gotta love project cars for your kids!!